Southern profit clipped by maintenance cost

SAN FRANCISCO (MarketWatch) — Regional power provider Southern Co. reported Wednesday a 38% drop in fourth-quarter profit, a move the company said reflects a deliberate push to catch up on maintenance projects deferred during the worst of the recession.

Southern
SO, -0.11%
said net income for the three months ended Dec. 31 fell to $153.5 million, or 18 cents a share, from $248.3 million, or 31 cents a share, in the year-earlier period.

Revenue for the quarter rose 7% to $3.77 billion from $3.51 billion.

The per-share results were in line with Wall Street expectations. Analysts polled by FactSet Research had predicted the company would earn 18 cents a share on $3.65 billion in revenue.

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“We took advantage of a recovering economy to shore up operations and maintenance in our systems,” Southern Chairman, President and Chief Executive Officer Thomas Fanning said in an interview with MarketWatch.

Much of the added cost focused on the company’s coal and gas-fired power plants, hydroelectric facilities and transmission and distribution line maintenance, which includes tree trimming.

Fanning explained that the company deferred much of that work in 2009, when it froze labor costs. “We basically reacted to the economy like other companies did.”

Easing the financial impact of stepped-up maintenance were gains in power sales among Southern’s industrial customers. Southern said the gains had been especially evident in a 35% jump in power demand at metal smelters and steel mills in its service territory, The region’s chemical industry accounted for a 10% increase in power sales.

“We’re seeing a broad-based recovery in industry but it’s still a jobless recovery,” Fanning said, adding that power sales to commercial and residential customers has yet to capture the same growth seen among its industrial customers.

Fanning said that the company plans to spend up to $17 billion over the next three years to accommodate the region’s expanding economy, depending on environmental rulings.

Power sales to commercial customers such as stores, offices and public buildings rose 2.8% from a year ago, while industrial power sales rose 3.8%. Wholesale power sales to nonregulated customers and other utilities fell 12% in the quarter.

Southern, based in Atlanta, serves about 4.4 million customers through four regulated utilities: Alabama Power, Georgia Power, Gulf Power and Mississippi Power.

Southern shares fell 30 cents, or 0.8%, to close at $38.16. The stock is up nearly 16% over the past 12 months, outpacing a 6.5% advance by the Dow Jones Utility Average
DJU, -0.18%
over the same period.

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